Limin James Chen v Kevin McNamara & Son Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT

ARBITRATION LIST

S CI 2013 01766

LIMIN JAMES CHEN and MEI FANG XU	Plaintiffs
v
KEVIN MCNAMARA & SON PTY LTD	First Defendant
v
DR GEORGE P DEUTSCH	Second Defendant

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JUDGE:	CROFT J
WHERE HELD:	Melbourne
DATE OF HEARING:	16 August 2013
DATE OF JUDGMENT:	11 October 2013
CASE MAY BE CITED AS:	Limin James Chen & Anor v Kevin McNamara & Son Pty Ltd & Anor
MEDIUM NEUTRAL CITATION:	[2013] VSC 539

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PRACTICE AND PROCEDURE – Non-compliance with time limit for filing and serving an originating motion applying for leave to appeal – Non-compliance with time limit for filing affidavit in support and summons associated with appeal – Length of delays – Whether reasonable or acceptable explanation for delays – Prejudice to other party – Prospects of success – Contravention of the overarching obligations of the Civil Procedure Act 2010 (Vic) – Kuek v Devflan Pty Ltd [2012] VSC 571 – Peter Schwartz (Overseas) Pty Ltd v Morton [2003] VSC 144 -

ARBITRATION – Domestic arbitral award – Leave to appeal an arbitral award - Manifest error of law - Commercial Arbitration Act 1984 (Vic), s 38 – Yesodei Hatorah College Inc v The Trustees of the Elwood Talmud Torah Congregation [2011] VSC 622 – Mediterranean Olives Financial Pty Ltd v Lederberger [2011] VSC 301

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J. Twigg	Francis V Gallichio Lawyers
For the First Defendant	Mr P. Marzella	Russell Kennedy

HIS HONOUR:

Introduction

There are currently two proceedings on foot which involve the same parties and which arise from an arbitral award dated 8 March 2013 (“the Award”)[1] made by the arbitrator, Dr George P Deutsch (“the Arbitrator”). The Award was made in relation to an arbitration between Limin James Chen (“Mr Chen”) and Mei Fang Xu (“Mrs Chen”)[2] (together, “the Plaintiffs”),[3] and Kevin McNamara & Son Pty Ltd (“KMS”). The parties were in dispute with respect to the construction of an underground water tank, a tennis court and associated landscaping works at 17 Yarradale Road, Toorak (“the property”).[4] The Plaintiffs are the owners of the property; at which they also reside. The Award, broadly speaking, found in favour of KMS.
[1]A copy of the Award is set out in exhibit FVG-1 of the affidavit of Francis Vincent Gallichio affirmed 9 August 2013.
[2]I note that Ms Xu is referred to in the Award, various affidavits and submissions as Mrs Chen. For the sake of avoiding confusion, I will also refer to her as Mrs Chen for the purposes of this judgment.
[3]I also note that the Award, various affidavits and submissions referred to Mr Chen and Mrs Chen collectively as “MJC”. However, for the purposes of avoiding confusion, I will refer to them collectively as “the Plaintiffs”.
[4]Gallichio Affidavit, paragraph 4.

In proceeding number S CI 2013 3479 KMS is seeking from the Court, amongst other things, an order that the Award be enforced (“the Enforcement Proceeding”).[5]
[5]See the Originating Motion and the Summons, both dated 8 July 2013, filed on behalf of KMS.

In proceeding number S CI 2013 1766 – which is the subject of the findings in this judgment – the Plaintiffs have sought leave from this Court to appeal, and to appeal, one or more questions of law arising under the Award pursuant to s 38 of the Commercial Arbitration Act 1984 (Vic) (“the Leave Proceeding”).[6] KMS is the first defendant, with the Arbitrator having also been joined to the proceeding as a second defendant in the Leave Proceeding.
[6]See the Origination Motion dated 8 April 2013 and the Summons dated 8 August 2013 filed on behalf of the Plaintiffs.

Both proceedings were made returnable for hearing before me on 16 August 2013. However, it is important to emphasise that the main issues heard related to the Leave Proceeding. No submissions were made with respect to KMS’ application in the Enforcement Proceeding. Given that context, I must also emphasise that the reasons and findings contained in this judgment were reached after consideration of only the evidence, submissions and materials filed in the Leave Proceeding. For the sake of avoiding confusion, I also note that I have not given consideration to any materials filed in the Enforcement Proceeding except where they have been referred to in an affidavit filed in the Leave Proceeding;[7] though some material filed in the Enforcement Proceeding and not specifically referred to in the Leave Proceeding material is referred to for the purpose of setting out the background and history of the proceedings in general.
[7]It should, however, be noted that the affidavit of Leonard Adrian Warren sworn 14 August 2013 also relied on three affidavits which were filed in the Enforcement Proceeding; affidavits which thereby become evidence in “the Leave Proceeding” (see paragraph 23, below).

Background

The history of this proceeding is conveniently set out in the affidavit of Francis Vincent Gallichio affirmed 9 August 2013 (the “Gallichio Affidavit”). It outlined the difficult and protracted dispute between the Plaintiffs and KMS.

Entry into contracts

On 26 April 2006, Planning Permit No. 0664/05[8] was issued by the City of Stonnington with respect to the property, permitting:

“Works within the special building, significant landscape and land subject to inundation overlay in accordance with the endorsed plans and subject to the following conditions.”

[8]Exhibit Bundle “FVG-1” referred to in the Gallichio Affidavit, pp 1-4.

On 11 June 2008, Mr Chen and KMS entered into a written agreement for the design and construction of a tennis court and associated works,[9] which contained the following arbitration clause:

“This Agreement shall be deemed an Arbitration Agreement within the meaning of the Commercial Arbitration Act 1984 (“the Act”). Either party may refer any dispute to arbitration pursuant to the Act seven days after notice of such dispute is served on the other party. The arbitrator shall be a nominee of the Victorian Chapter Chairman of the Institute of Arbitrators Australia whose decision and award in respect of the dispute and any costs shall be binding on the parties. Neither party shall maintain an action upon the dispute after the dispute has been resolved by arbitration and then only for enforcement of the decision and award of the arbitrator.”

[9]Gallichio Affidavit, paragraph 7; and Exhibit Bundle “FVG-1” referred to in the Gallichio Affidavit, pp 5-14. See also the Affidavit of Leonard Adrian Warren sworn 14 August 2013 (“the Warren Affidavit”), Exhibit LAW 1.

Some time in August 2008, Mr Chen and KMS entered into an oral agreement for landscaping works.[10]
[10]Gallichio Affidavit, paragraph 8.

On 19 August 2008, Mr Chen and KMS also entered into a written agreement for the construction of a 100,000 litre underground water storage tank.[11] This agreement also contained an arbitration clause identical to that contained in the agreement for the construction of the tennis court.[12]
[11]Gallichio Affidavit, paragraph 9; and Exhibit Bundle “FVG-1” referred to in the Gallichio Affidavit, pp 15-18. See also the Warren Affidavit, Exhibit LAW 1. I note, however, that the copy of the Water Tank Contract is not signed – though that does not appear to be an issue for the purposes of these proceedings.
[12]See above at paragraph 7.

In the Award, the Arbitrator determined that all the works performed by KMS – as set out above – fell under one contract (the “Contract”), which comprised of written quotations, with oral and written variations.[13]
[13]Award, paragraphs 41 and 46; and see the Outline of Submission of the Plaintiffs, paragraph 7.

Dispute between the Plaintiffs and KMS

A dispute then arose between the parties which can be summarised as concerning “landscaping works to the banks of the Yarra River, which on Plaintiffs’ case caused them loss and damage including costs incurred in placing and removing rock on the bank and the deconstruction and reinstatement of their land at the Yarra Bank.”[14] KMS delivered a Notice of Dispute on 16 December 2008 (the “Notice of Dispute”) to the Plaintiffs.[15] The Notice of Dispute set out the complaint as follows:

“May [sic] Chen is indebted to this company for $89,131.00 for construction of a tennis court and undercourt water tank.”

[14]Outline of Submissions of the Plaintiffs, paragraph 9.

[15]Gallichio Affidavit, paragraphs 10-12; and Exhibit Bundle “FVG-1” referred to in the Gallichio Affidavit, p 19.

On 4 February 2009, the Arbitrator was nominated by the Institute of Arbitrators and Mediators Australia (“IAMA”), and was subsequently confirmed as the arbitrator of the disputes.[16]
[16]Gallichio Affidavit, paragraph 13.

Question of jurisdiction

Prior to the arbitration being commenced, a question arose as to whether the Arbitrator had jurisdiction to enter into the reference given the possible application of the Domestic Building Contracts Act 1995 (Vic) (the “DBC Act”).[17] The Arbitrator concluded that he had jurisdiction and entered upon the reference on 16 February 2009.[18] The Plaintiffs subsequently issued a proceeding in this Court seeking an injunction to restrain the arbitration from proceeding. As a consequence, the Arbitrator adjourned the arbitration until the Court could resolve this jurisdictional issue.[19]
[17]Gallichio Affidavit, paragraph 14.
[18]Gallichio Affidavit, paragraph 15.
[19]Gallichio Affidavit, paragraphs 16 and 17.

At first instance Hargrave J dismissed the application[20] and concluded that “[a]s all of the works which the builder agreed to perform on behalf of the owners are subject to the arbitration clause, the arbitration should proceed on all issues.”[21] The Plaintiffs then sought to appeal Hargrave J’s decision – but the appeal was dismissed by the Court of Appeal.[22]
[20]Chen v Kevin McNamara & Son Pty Ltd [2009] VSC 294.
[21]Chen v Kevin McNamara & Son Pty Ltd [2009] VSC 294 at [44].
[22]Chen v Kevin McNamara & Son Pty Ltd [2012] VSCA 63 (Maxwell P, Redlich JA and Robson AJA).

Arbitration

The arbitration continued with interlocutory steps and culminated in a eight-day hearing commencing 21 November 2012.[23] On 8 March 2013, the Arbitrator published the Award,[24] in which he found comprehensively in favour of KMS. The Award required the Plaintiffs to pay KMS:[25]
[23]Gallichio Affidavit, paragraphs 20 and 21.
[24]A copy of the Award is contained in Exhibit Bundle “FVG-1” referred to in the Gallichio Affidavit, p 43 onwards.
[25]See Chapter 2 of the Award.

· by 15 March 2013 an amount of $117,380.27;

· by 15 March 2013 an amount of $8,477.15 less an adjustment for materials collected by KMS from the Plaintiffs; and

· interest under the contract calculated at a rate of 18% per annum compounded daily commencing on the due date of payment for each relevant invoice, which at 15 March 2013 was the sum of $134,611.31.

(Collectively, the “Award Sums”)

The Arbitrator then made a further award with respect to costs (the “Interim Costs Award”), which found in favour of KMS and determined that costs be taxed on a party and party basis.[26]
[26]See the First DIK Affidavit, paragraph 19, and Exhibit DIK 8.

Procedural history of the proceedings

On 8 April, the Plaintiffs sought to file electronically an originating motion dated 8 April 2013 (the “Originating Motion”) seeking to challenge the Award. It appears that the Plaintiffs’ solicitor experienced technical difficulties with CITEC, which is a web-based service provided by the Court allowing parties to file various documents electronically – including an originating motion. The Originating Motion was ultimately recorded as being filed at 3.00pm on 10 April 2013; though I note it contains a notation made by the Prothonotary that “[g]enuine attempts were made to file this document prior to 4pm on 8 April 2013.” This is further discussed below in the context of whether the Originating Motion was filed within the prescribed time period set out in the provisions of the Supreme Court (General Civil Procedure) Rules 2005 (the “Chapter I – Rules”) and the Supreme Court (Miscellaneous Civil Proceedings) Rules 2008 (the “Chapter II – Rules”) (together, “the Rules”).[27]
[27]See paragraph 44 and onwards.

The Originating Motion sets out the Plaintiffs’ claims as follows:

“The Plaintiffs claim the following relief:

1.Under section 38 of the Commercial Arbitration Act 1984, leave be granted to appeal on one or more questions of law arising under the award made by the second defendant on 8 March 2013.
2.Under section 38 of the Commercial Arbitration Act 1984, appeal be allowed on one or more questions of law arising under the award made by the second defendant on 8 March 2013.

3. Costs.

4. Such further or other orders as the Court deems fit.”

It should also be noted that the Originating Motion was not served on KMS and the Arbitrator until 31 May 2013 and 17 June 2013, respectively.[28]
[28]See KPM Affidavit, Exhibit KPM 5.

The Appeal Proceeding did not progress until a directions hearing was listed for 29 July 2013 where orders were made (the “29 July Orders”), amongst others, that:

“1. Any application by the Plaintiffs, or any of them:

(a)to extend the time for filing and serving the Originating Motion dated 8 April 2013 in this proceeding (proceeding no. SCI 2013 01766) and any summons and affidavit in support; and/or
(b)for leave to appeal the award of Dr George P Deutsch made on 8 March 2013 pursuant to s 38 of the Commercial Arbitration Act 1984,

be made by summons which, together with any affidavit of affidavits in support, is to be filed and served on all parties on or before 8 August 2013.”

In the meantime, in relation to the Enforcement Proceeding, on 8 July 2013, KMS made an application, by originating motion and summons, which was supported by two affidavits.[29] The application made by KMS sought leave under s 33 of the Commercial Arbitration Act 1984 (Vic) (“the Act”) and r 9.04 of the Chapter II – Rules to enforce the Award. As I have noted above,[30] the Enforcement Proceeding is not the subject of the findings and reasons in this judgment.
[29]See the Affidavit of David Israel Kazatsky affirmed 25 July 2013, Exhibits DIK1 – DIK8 and the Affidavit of David Israel Kazatsky affirmed 29 July 2013, Exhibits DIK9 – DIK10.
[30]See paragraph [4] above.

Following the making of the 29 July Orders, the Plaintiffs filed and serve upon KMS and the Arbitrator a summons dated 8 August 2013 (the “Summons”). The Gallichio Affidavit was also not formally filed until during the hearing on 16 August 2013[31] – though it would appear both KMS and the Arbitrator did receive copies of the affidavit prior to then – but no issue of notice was raised with respect to the Gallichio Affidavit.
[31]Transcript, p 9.

In response, KMS filed and served an affidavit of Leonard Adrian Warren, solicitor for KMS, sworn 14 August 2013 (the “Warren Affidavit”) containing exhibits LAW 1 – LAW 28. I note that the Warren Affidavit cross-references and relies on three affidavits filed with respect to the Enforcement Proceeding.[32]
[32]Affidavit of Kevin Patrick McNamara sworn 8 July 2013, containing exhibits KPM 1 – KPM 5 (the “KPM Affidavit”); Affidavit of David Israel Kazatsky affirmed 25 July 2013, Exhibits DIK 1 – DIK 8 (the “First DIK Affidavit”); and Affidavit of David Israel Kazatsky affirmed 29 July 2013, Exhibits DIK 9 – DIK 10 (the “Second DIK Affidavit”).

I also received written submissions from the Plaintiffs dated 15 August 2013 (the “Plaintiffs’ Submissions”) and KMS dated 15 August 2013 (the “KMS Submissions”).

Additionally, during the hearing on 16 August 2013, the Plaintiffs’ counsel made an application for leave to amend the Originating Motion to also seek leave to appeal, and to appeal, the Interim Costs Award.[33]
[33]See Transcript, pp 1 – 3.

Summary of the Issues

The Summons sets out the matters now that require the Court’s consideration:

“1.Under Chapter II – Supreme Court (Miscellaneous Civil Proceedings) Rules, Rule 4.05(2)(a), an extension of time be granted to the plaintiffs to apply, under s.38 of the Commercial Arbitration Act 1984, for leave to be granted to appeal on one or more questions of law arising under the award made by the second defendant on 8 March 2013.
2.Under Chapter II – Supreme Court (Miscellaneous Civil Proceedings) Rules, Rule 4.05(2)(a), or the Court’s inherent jurisdiction, an extension of time be granted to the plaintiffs to file a summons in support of an application for leave to be granted to appeal (under s.38 of the Commercial Arbitration Act 1984, on one or more questions of law arising under the award made by the second defendant on 8 March 2013) and an affidavit in support of the application for leave to be granted to appeal.
3.If extensions of time under paragraphs 1 and 2 above are granted, then under Chapter II – Supreme Court (Miscellaneous Civil Proceedings) Rules, Rule 4.05(2)(b), or the Court’s inherent jurisdiction, the extensions are granted retrospectively so that time to:
(a)apply for leave to appeal is extended to 10 April 2013, and the Originating Motion dated 8 April 2013 and filed 10 April 2013 stand as the plaintiffs’ application for leave to appeal;
(b)file any summons and affidavit in support of the application for leave to appeal is extended to 8 August 2013, and this summons stand as the summons for the leave sought in the Originating Motion dated 8 April 2013 and filed 10 April 2013, and the affidavit of Francis Vincent Gallichio affirmed 8 August 2013 filed in this proceeding, stand as the affidavit filed in support of the application for leave to appeal.

4.Under section 38 of the Commercial Arbitration Act 1984, leave be granted to appeal on one or more questions of law arising under the award made by the second defendant [the Arbitrator] on 8 March 2013.
5.Under section 38 of the Commercial Arbitration Act 1984, appeal be allowed on one or more questions of law arising under the award made by the second defendant on 8 March 2013.
6.The proposed notice of appeal exhibited to the affidavit of Francis Vincent Gallichio affirmed 8 August 2013 to stand as notice of appeal and the affidavit to stand as affidavit in support of the appeal.

7. Costs.
8. Such further or other orders as the Court deems fit.”

In short, the Plaintiffs make the following applications:

· to extend the time under rr 4.06, 4.07 and 4.08 of the Chapter II – Rules, in which to file the Originating Motion, Summons and Gallichio Affidavit;

· to amend the Originating Motion;

· leave to appeal the Award under s 38 of the Act; and

· leave to appeal the Interim Costs Award.

I will deal with these issues in the order set out above.

Extension of Time for Leave to Appeal the Award
Delays in filing the Originating Motion, Summons and Gallichio Affidavit

Order 4 of the Chapter II – Rules deals with the procedures relating to appeals from tribunals.[34] As appeals under the Act require the Court’s leave, r 4.06 provides for the steps which must be taken in order to commence an appeal from an arbitral award rendered under the Act:
[34]A “tribunal” is defined in r 4.02 to mean “any person or body, not being a court, in relation to whose orders a right of appeal to the Court is conferred by an Act.” Such a tribunal can include an arbitral tribunal given the rights of appeal contained in the Commercial Arbitration Act 1984 (Vic).

“(1) An application for leave to appeal shall be made within 28 days after the day of the order of the tribunal.
(2) An application for leave to appeal shall be made by originating motion.
(3)The application is taken to be made when the originating motion is filed.
(4)As soon as practicable after filing the originating motion, the applicant shall—
(a)deliver a sealed copy of the originating motion to the registrar or other proper officer of the tribunal; and
(b)serve the originating motion on the proposed respondent to the appeal.”

The Award was made on 8 March 2013. Within the time limit prescribed by r 4.06 of the Chapter II – Rules, the Plaintiffs had until Friday 5 April 2013 to make this application for leave to appeal. There was some query during the hearing of the application about the date, so I observe that the, in accordance with the language of r 4.06(1), twenty-eight days are calculated from the day after the Award was made, meaning that 9 March 2013 was the first day and 5 April 2013 was the twenty-eighth day. The Plaintiffs’ solicitors did not make this application until, as the Court records indicate, 3.00pm on 10 April 2013.

Additionally, as KMS submitted,[35] r 4.06(4) also requires the Originating Motion to have been served on the proposed respondents “as soon as practicable after the filing of the originating motion.” However, the Originating Motion was not provided to the solicitors for KMS until 31 May 2013, and it was only provided to the Arbitrator on 17 June 2013.[36]
[35]See KMS’ Submissions dated 15 August 2013.
[36]See KPM Affidavit, Exhibit KPM 5.

The Plaintiffs were also late in filing the Summons and Gallichio Affidavit. Under rr 4.07 and 4.08 of the Chapter II – Rules, a summons and a supporting affidavit is required to be filed within seven days after an originating motion has been filed. For convenience, I set out both rules in full:

“4.07 Affidavit in support

(1)Within seven days after filing the originating motion, the applicant shall file an affidavit in support of the application for leave to appeal.
(2)The affidavit shall set out the acts, facts, matters and circumstances relating to—

(a) the order of the tribunal;

(b) the grounds in the proposed notice of appeal.

(3) There shall be included as exhibits to the affidavit—

(a) a copy of the order from which the appeal is to be brought;

(b) a copy of any reasons given for the order; and

(c) a copy of the proposed notice of appeal—

or their absence as exhibits shall be accounted for in the affidavit.

4.08 Summons before Associate Judge

(1) Within seven days after filing the originating motion, the applicant shall apply on summons to an Associate Judge for the leave sought in the originating motion.

(2) The application is taken to be made when the summons is filed.

(3) The applicant shall serve the summons and a copy of the affidavit in support and of any exhibit on the proposed respondent to the appeal not less than 14 days before the day for hearing named in the summons.

(4) The proposed respondent shall file and serve a copy of any affidavit in answer and shall serve a copy of any exhibit not less than five days before the day for hearing named in the summons.

(5) If at any time the Associate Judge is satisfied that the hearing of the summons should be expedited, the Associate Judge may of his or her own motion or on the application of the respondent bring the summons on for hearing.”

As the Originating Motion was filed on 10 April 2013, the Plaintiffs were required to file the related summons and affidavit in support of the application by 17 April 2013. Though, as KMS submitted, the Summons and Gallichio Affidavit were due to be filed on 12 April 2013 (on the assumption that the Originating Motion had to be filed by 5 April 2013).

Ultimately, the Summons was not filed until 8 August 2013 (one hundred and nineteen days late) and the Gallichio Affidavit was not filed until 16 August 2013 (one hundred and twenty-seven days late).

Another issue, which I also note, is that the Arbitrator’s Interim Costs Award (made on 22 April 2013) was never technically sought to be appealed from until counsel for the Plaintiffs sought to amend the Originating Motion at the hearing of the application on 16 August 2013.[37]

Relevant rules to the application to extend time

[37]Transcript, p 1.

In order for the Plaintiffs to proceed with an application seeking leave to appeal the Award, they must obtain from the Court an extension of time to file the Originating Motion, Summons and Gallichio Affidavit. Their application to extend time is made under r 4.05(2) of the Chapter I – Rules, which may operate retrospectively. That rule provides:

“4.05Leave to Appeal

...

(2) If an extension of time is needed within which to apply for leave to appeal—

(a) an application for that extension may be made to, and determined by, the Associate Judge in conjunction with the application for leave to appeal; and

(b) if granted, the extension may be granted retrospectively.”

The Court is also empowered to extend time fixed under the Rules pursuant to r 3.02(2) of the Chapter I - Rules:[38]
[38]Outline of Submissions of the Plaintiffs, paragraph 18.

“3.02 Extension and abridgement

(1) The Court may extend or abridge any time fixed by these Rules or by any order fixing, extending or abridging time.

(2) The Court may extend time under paragraph (1) before or after the time expires whether or not an application for the extension is made before the time expires.

(3) Unless the Court otherwise orders, any time fixed by these Rules or by any order fixing, extending or abridging time may be extended by consent without an order of the Court.”

General principles and factors to consider in exercising the discretion to extend time

The principles and factors guiding the Court with respect to applications to extend time for the filing and serving of documents are uncontroversial. In Vimplane Pty Ltd v Cirss[39] Habersberger J observed that:[40]

“…[t]he decision whether or not to extend time is discretionary. The overriding principle is what the interests of justice require.[41] Four well-recognised factors which require consideration on any application for an extension of time are the length of the delay, the reason for the delay, whether there is an arguable case and the extent of any prejudice to the other party.[42]”

[39][2005] VSC 45

[40]Vimplane Pty Ltd v Cirss [2005] VSC 45 at [29]. See also similar observations by Byrne J in Peter Schwartz (Overseas) Pty Ltd v Morton [2003] VSC 144 at [12].

[41]Jackamarra v Krakouer (1998) 195 CLR 516 at 527 per Gummow and Hayne JJ and at 539 per Kirby J

[42]Palata Investments Ltd v Burt & Sinfield Ltd [1985] 1 WLR 942; Esther Investments Pty Ltd v Markalinga Pty Ltd (1989) 2 WAR 196; Jackamarra v Krakouer (1998) 195 CLR 516 at 542–543 per Kirby J and State of Victoria v Davies (2003) 6 VR 245 at [23] per Batt JA

Kyrou J, more recently, made similar observations in Kuek v Devflan Pty Ltd:[43]
[43]Kuek v Devflan Pty Ltd [2012] VSC 571 at [22]-[26].

“24. Whether a time limit should be extended is in the discretion of the Court. Such discretion is to be exercised in the light of the circumstances of the particular case, and is given for the purpose of enabling the Court to do justice between the parties.[44]
[44]Komba v National Australia Bank Ltd [2010] VSCA 232 (27 August 2010) [29] (‘Komba’).

25. Relevant factors to be considered in determining whether or not to grant an extension of time are the length of the delay, the reasons for the delay, whether there is an arguable case, and the extent of any prejudice to the respondent if the extension is granted.[45] These factors are not exhaustive.

26. Other relevant matters include whether the delay was intentional or contumelious, or merely the result of a bona fide mistake or blunder, and whether the delay was that of the litigant or of its legal representatives. It may also be relevant, where the default is that of a party's legal representatives, to take into account considerations personal to the party which might have affected its ability to safeguard its own interests. The extent to which any such prejudice may be remedied by an appropriate costs order may also be relevant.[46]”

[45]Jackamarra v Krakouer (1998) 195 CLR 516, 521 [7], 539-43 [66] (‘Jackamarra’); Komba [2010] VSCA 232 (27 August 2010) [29]; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, 215 [103] (‘Aon’).

[46]Jackamarra (1998) 195 CLR 516, 543 [66].

These observations are consistent with the approach of the Court of Appeal in Chargold Project Management Pty Ltd v Jalak Pty Ltd (T/A Webb Concretors).[47] In that case, Maxwell P said:[48]

“The principles governing extension of time were summarised in Luxmore Pty Ltd v Hydedale Pty Ltd[49] in the joint judgment of Kellam JA and myself:

The interests of justice will almost always require that an extension of this kind [of the date for filing of the notice of appeal] be granted where there is an explanation for the non-compliance and there is no irremediable prejudice to the other party. Of course there will be circumstances in which the appeal is so obviously hopeless that the Court could be satisfied that the extension would really be futile.[50]”

[47][2010] VSCA 210.

[48][2010] VSCA 210 at [3].

[49][2008] VSCA 212.

[50]Ibid [3] (citations omitted).

The upshot of the authorities is that the following factors need to be considered:[51]
[51]See KMS’ Submissions, paragraph 18.

· the length of the delay;

· the reasons for the delay;

· whether there is an arguable case; and

· the extent of any prejudice to the respondent if the extension is granted.

These factors are not exhaustive and, in the circumstances of the case, the conduct of the Plaintiffs and their solicitors needs to be also considered in the context of the Civil Procedure Act 2010 (Vic) (the “CPA”). Further, given that this matter is also within the context of an arbitral legislative regime, the observations of Byrne J in Peter Schwartz (Overseas) Pty Ltd v Morton,[52] where his Honour considered an extension of time for leave to appeal an arbitral award under the Act,[53] are apposite:[54]

“12. In support of the time extension, counsel for the seller addressed four matters: the length of the delay, the reason for the delay, whether the applicant showed an arguable case, and whether there was any prejudice shown to have been suffered by the respondent buyer. In Doran Constructions Pty Ltd v Health Administration Corporation of New South Wales[55], the New South Wales Court of Appeal held that an applicant for extension of time for leave to appeal pursuant to s.38 must show, first, an explanation for the delay, second, a substantial point to be argued and third, a demonstration of injustice if the applicant is prevented from arguing the point. The task of the Court is to exercise its discretion having regard to these matters and any other matters placed before it to determine where the justice of the case points. These matters must be weighed against the evident purpose of the arbitral regime that there be finality to disputes at an arbitral level.[56] To my mind, this is an approach that I should adopt in considering, not only the time extension application to bring the s.38 application for leave, but also the time extension application for the s.42 application.[57]”

[52][2003] VSC 144.

[53]KMS’ Submissions, paragraph 19.

[54][2003] VSC 144 at [12].

[55](1994) 12 BCL 59.

[56]Doran Constructions Pty Ltd v Health Administration Corporation of New South Wales (1994) 12 BCL 104 at 126, per Rolfe J.

[57]Doran Constructions Pty Ltd v Health Administration Corporation of New South Wales (1994) 12 BCL 104 at 124, per Rolfe J.

With respect to the reasons for the delay, I note, by way of example, that various decisions have referred to a need for a “reasonable explanation”,[58] “acceptable explanation”,[59] “adequate explanation”,[60] or “satisfactory explanation”.[61] None of these varying formulations does, in my view, distract from weighing the reasons for the delay in the particular context of the application which is made. In the present circumstances, the weighing process must take place in the context of the relevant legislative regime applicable to commercial arbitration; as indicated by Byrne J in Peter Schwatz. Nevertheless, the context, legislative and otherwise, will naturally vary – both generally, and more particularly, as between differing legislative regimes with respect to commercial arbitration.

Originating Motion

[58]Giles v Jeffrey [2013] VSCA 267; Ticco Pty Ltd v Complete Family Healthcare Services Pty Ltd [2005] VSCA 221. This also seems to be the position in some New South Wales decisions, see Samimi v Seyedabadi; Seyedabadi v Samimi [2013] NSWCA 279 at [29] – [42].

[59]Kuek v Devflan Pty Ltd [2012] VSC 327.

[60]Rees v County Court of Victoria [2011] VSCA 179.

[61]Giurina v Owners Corporation [2013] VSC 39.

The Originating Motion was filed late by five days,[62] which the Plaintiffs submitted is “relatively short.”[63]
[62]See paragraphs [43] above.
[63]Outline of Submissions of the Plaintiffs, paragraph 24.

The Plaintiffs submitted that the reason for the delay in filing the Originating Motion was due to a “misunderstanding on the time to appeal.”[64] The explanation for the delay is contained in the Gallichio Affidavit:[65]
[64]Outline of Submissions of the Plaintiffs, paragraph 22(a).
[65]Gallichio Affidavit, paragraphs 33 – 36; and Exhibit Bundle “FVG-1” referred to in the Gallichio Affidavit, pp 39-41.

“33 Following the Award on 8 March, I sought advice from counsel on prospects of appeal. Counsel was unable to provide that advice until into the third week after the Award.

34 Shortly before the end of the 28 day period, I was given instructions to proceed with making an application for leave to appeal.

35 On 6 April I prepared an originating motion and sought advice from counsel to settle it. After discussing with counsel Chapter II – Rule 4.06 stating ‘that appeal shall be made within 28 days after (my emphasis) the day of the order of the tribunal’, and noting that it did not say ‘within 28 days of the day of the order of the tribunal’, I took that distinction to mean the 28 day period ended on Monday, 8 April 2013. In hindsight, and after again speaking to counsel, arguably the calculation of when the 28 period [sic] ended, depending on the correct interpretation of Chapter II – Rule 4.06, may have been Friday, 6 April 2013 [sic].

36 By reason of my belief about when the 28 day period ended, on Monday, 8 April 2013, I attempted to electronically file the Originating Motion of 8 April 2013 on the Supreme Court’s CITEC system. What then occurred is set out in my email correspondence to the Prothonotary of 15 April 2013 and his reply of 25 April in which he states that, after reviewing the file, he was convinced that I ‘genuine attempts to cause his Originating Motion to be filed prior to 4pm on Monday, 9 April’ and ’More particularly, an irregularity in the capacity of CITEC to recognise your peculiar application caused a delay in filing.’”

Mr Gallichio’s explanation suggests a concession that there was an incorrect interpretation of r 4.06; particularly when time began to run under that rule. This means that the unfortunate issues experienced with filing the originating motion using the Court’s CITEC system – whilst nevertheless regrettable – were not the reason for the Originating Motion being filed late. Even if there had been no issues experienced with filing the Originating Motion on 8 April 2013 using the Court’s CITEC system, the Plaintiffs would, in any event, have been late with filing the Originating Motion by three days. As it is, they were late by five days.

KMS submitted that the explanations proffered by the Plaintiffs’ are not adequate as a basis for their application and that the Plaintiffs’ solicitors should have been aware of the time period under the Rules within which the Originating Motion was required to be filed.[66] KMS go further to submit that the Plaintiffs’ solicitor, Mr Gallichio, prior to or on 8 April 2013, was well aware of the time requirements for any application for an appeal.[67] However, in my view, the evidence does not indicate that the reason for the late filing of the Originating Motion was anything other than the result of a mistake in calculating those time requirements under the Rules.
[66]KMS’ Submissions, paragraphs 20 – 24.
[67]KMS’ Submissions, paragraphs 28(b).

It follows that the issue resolves itself into the question whether a mistake of this nature made by the Plaintiffs or by their solicitor could be considered a reasonable or acceptable delay.

In Jakamarra v Krakouer,[68] the High Court said that a factor to be considered in situations of this kind include:

“…whether the delay was intentional or contumelious, or merely the result of a bona fide mistake or blunder, and whether the delay was that of the litigant or of its lawyers, with which the litigant should not be saddled. It may also be relevant, where the default is that of a party's legal representatives, to take into account considerations personal to the party which might have affected its ability to safeguard its own interests.”

[68](1998) 195 CLR 516 at 541.

In Leahey v Trescowthick,[69] an application to extend time was considered in the context of an application under the Administration and Probate Act 1958 (Vic). There, an oversight and mistake by a solicitor required an extension of time to enable a testators’ family maintenance claim to be made. With respect to the solicitor’s mistake and the implications arising from that, Warren J (as her Honour then was) said:[70]

“Nevertheless, turning to the proper principles to be applied in the exercise of the discretion, the fault on the part of the solicitor of a potential applicant is not necessarily fatal to an application for extension of time. In Brown v Holt [(1961) VR 435], supra, Pape J considered an application for an extension of time by four adult daughters of the deceased. Their solicitor failed to lodge a claim under s91 of the Administration and Probate Act in time allegedly due to pressure of work. The solicitor deposed that he overlooked the fact that the six month period prescribed by the Act had elapsed. Pape J observed (at 437-438) in reliance upon a judgment of the Supreme Court of South Australia in Re Traeger (1948) SASR 248 that it will be appropriate to grant an extension in such circumstances because it would be unjust to penalise an applicant where there is a short delay and when such delay has been caused by the oversight of a solicitor. The principle to be extracted from the judgments in both Brown v Holt and Re Traeger is that if the court considers that an injustice will be done if the extension is not granted then the oversight of an applicant’s solicitor should be excused.”

[69][1999] VSC 409.

[70][1999] VSC 409 at [27].

In Chargold Project Management Pty Ltd v Jalak Pty Ltd (T/A Webb Concretors),[71] the Victorian Court of Appeal granted an extension of time for service of a notice of appeal where the delay was only five days and was due to a bona fide mistake of the solicitor.[72]
[71][2010] VSCA 210.
[72][2010] VSCA 210 at [4] (per Maxwell P).

As in the present case, with respect to the filing of the Originating Motion, the delay was not excessive. Therefore, I am of the view that the Plaintiffs have provided a reasonable or acceptable explanation for the delay for the filing of the Originating Motion.

Additionally, there is the question whether the Originating Motion was served on KMS’ solicitors and the Arbitrator “as soon as practicable” as required by r 4.06(4) of the Chapter II – Rules. The Plaintiffs do not provide a clear explanation for the delay in serving the Originating Motion on KMS’s solicitors and the Arbitrator. The evidence of Mr Leonard Warren of Russell Kennedy, solicitors for KMS, is that during a conversation with Mr Gallichio on 8 April 2013:[73]

“I [Leonard Warren] asked him [Mr Gallichio] when KMS would know whether or not the [Plaintiffs] had appealed. I said, there was no reason why he shouldn’t tell me as he would know by now whether or not an appeal had been filed. He responded that I would find out in due course as the Rules required him to serve any appeal documents ‘as soon as practicable’.”

[73]The Warren Affidavit, paragraph 29(c); and see also KMS’ Submissions, paragraph 28(b)(iii)(3).

Thus, there is a real question whether the Originating Motion was served on KMS and the Arbitrator “as soon as practicable” as required by the Rules. That expression has been defined in the context of, for example, the Road Safety Act 1986 (Vic) by Smith J in Nicholl v Hunter:[74]

“The key words chosen to give effect to the scheme are ‘as soon as practicable’. They will not ensure in all cases that the various steps are taken in the shortest time (see for example Dickson v Kimber [(unreported, 8 July 1992)] above). They present a compromise which should ensure in most cases that a meaningful second test can be done. The words ‘as soon as practicable’ do not defy definition (cf Creely v Ingles [1969] VR 732, above, at 734). ‘As soon as‘ means ‘at the very time or moment when’. ‘Practicable’ means ’capable of being carried out in action’ (Shorter Oxford Dictionary, 1973). They do not mean ’within a reasonable time’. At the same time the words quoted do not impose a standard of perfection but require the practicalities to be considered and for the certificate to be given to the person at the moment when the circumstances of the given situation allow it to be done. A reasonable approach is to be taken in assessing any given case.”

[74](unreported, Supreme Court of Victoria, Smith J, 15 July 1994, BC9401182) at 11.

The observations of Smith J in Nicholl v Hunter[75] are in my view apposite to these circumstances. Whilst the words “as soon as practicable” do not impose a standard of perfection, they do require more expeditious action than where something needs to be done “within reasonable time.” From the time when the Originating Motion was filed (10 April 2013) to when it was ultimately served upon KMS (31 May 2013) and the Arbitrator (17 June 2013),[76] fifty-one and sixty-eight days had elapsed, respectively. In these circumstances, I do not think the Plaintiffs provided copies of the filed Originating Motion upon the KMS and the Arbitrator as soon as practicable. The reasons that the Plaintiffs rely upon for the delays in their actions following the filing of the Originating Motion[77] cannot adequately explain the delay in the provision of the Originating Motion to KMS and the Arbitrator and why it was not provided as soon as practicable.

Summons and Gallichio Affidavit

[75](unreported, Supreme Court of Victoria, Smith J, 15 July 1994, BC9401182).

[76]See paragraph [19] above.

[77]See paragraphs [56] and [57] below.

The Summons was filed one hundred and nineteen days late.[78] The Gallichio Affidavit was filed one hundred and twenty-seven days late.[79]
[78]See paragraphs [22] above.
[79]See paragraphs [22] above.

The Plaintiffs submitted that the delay in filing the Summons and Gallichio Affidavit was because “the plaintiffs had to sell one of the two properties that they owned on Yarradale Road to enable them to be in a position to meet their commitments personally, within this proceeding and from earlier proceedings.”[80] The Plaintiffs also submitted that the “excuse effective is ‘exhaustion’ financially which with respect to the time and expense involve is considerable. Hesitation or lack of desire for a further argument is understandable.”[81] The delay in filing these two documents was sought to be explained in further detail by the Gallichio Affidavit:[82]

“Following the filing of the application for leave, I was instructed by Mr Chen and believe that, for reasons including the making of the Award and the payment of legal costs ordered against them in the earlier litigation, before immediately continuing with the leave to appeal application, they wished to find a purchaser for their adjoining property at No. 15 Yarradale Road (which they also own apart from their home at No. 15 Yarradale Road). I am informed by Mr Chen, and believe, that he wished to take this course to put he and his wife in a better position to meet their business and private obligations, including any obligation that might result from this appeal, any enforcement proceedings, or as a result of any order or undertaking the Court might or require them to give.

I am informed by Mr and Mrs Chen, and believe, that in mid June 2013 they entered into a contract for the sale of the 15 Yarradale Road property and now seek the Court’s approval to continue with the leave to appeal application.”

[80]Outline of Submissions of the Plaintiffs, paragraph 22(b).

[81]Outline of Submissions of the Plaintiffs, paragraph 25.

[82]Gallichio Affidavit, paragraphs 37 – 38.

Counsel for the Plaintiffs said that Mr Chen needed funds to be able to make any payments needed to be made for the purpose of running the current proceedings (including, for example, security for costs).[83]
[83]Transcript, p 11.

KMS submitted that the Plaintiffs’ desire to sell the 15 Yarradale Road property is not an explanation or proper explanation:[84]
[84]KMS’ Submissions, paragraphs 29 – 31.

“29. ...the fact that [the Plaintiffs] wished to first sell No. 15 is not an explanation or proper explanation. [The Plaintiffs] by their own admission simply ignored the requirements of the Rules and the Practice Note.

30. Put simply, [the Plaintiffs] have decided (without telling the Court or the defendants) to put their private property and business interests above those of the Court and its requirements. [The Plaintiffs] expected the Court and the defendants to wait until they were ready to proceed after apparently putting themselves ’in a better position to meet their business and private obligations, including any obligation that might result from this appeal, any enforcement proceedings, or as a result of any order or undertaking the Court might make or require them to give’.”

31. By not proceeding with the application by filing and serving the requisite documents in the prescribe time [the Plaintiffs] assumed the risk, including the risk that KMS would be prejudiced by that delay. These circumstances are similar to those in Perpetual v Smith...For similar reasons that Perpetual’s application for an extension of time was refused, so should [the Plaintiffs’] like application.”

Counsel for KMS suggested that what prompted the Plaintiffs to proceed with the Appeal Proceeding was the steps taken by KMS in the Enforcement Proceeding.[85]
[85]Transcript, p 52.

Sometimes a delay in the filing of court documents because of difficult personal circumstances may serve as a reasonable or adequate explanation.[86] However, I do not think that the Plaintiffs’ decision to sell the 15 Yarradale Road property falls into that category. The explanation contained in the Gallichio Affidavit suggests that the decision to sell the property was a private business decision and, in my view, also a tactical decision in the context of the current litigation. KMS’ submissions referred to a number of decisions[87] where requests for an extension of time were dismissed for various reasons.[88] In Perpetual Trustee Company Limited (ACN 000 001 007) v Smith,[89] the party seeking to extend the time to make an appeal had failed to do so in time because it had been dealing with third parties in an attempt to resolve the matter.[90] The Full Court of the Federal Court found that this did not constitute a “special reason” warranting an extension of time.[91] Some care must be taken in taking this decision of the Federal Court into consideration given the difference in the language in Chapter I – Rules and the Federal Court Rules 1979. Rule 52.15(2) of Federal Court Rules provides that:

“…the Court or a Judge for special reasons may at any time give leave to file and serve a notice of appeal.” (emphasis added)

The requirement that it be for “special reasons” means that the principles guiding the Federal Court’s discretion are somewhat different from the principles relevant to this Court’s exercise of discretion under r 3.02 of the Chapter I – Rules.[92] Nevertheless, I observe that the circumstances of that case and in these proceedings are analogous in the sense that the relevant delay is not the result of accidental omission, mistake or personal hardship; rather, the delay, in both instances, is the result of a conscious decision to ignore the prescribed time limits for reasons peculiar to the particular circumstances.

[86]See, for example, in the context of an application under the Administration and Probate Act 1958 (Vic) in Day & Anor v Raudino & Anor [2009] VSC 463 where Kaye J found that domestic problems and commitments were, amongst with other things, contributed to establishing a reasonable explanation for a delay making an application.

[87]KMS’ Submissions, paragraph 19. I note that KMS’ Submissions, due to a typographical error, mark these paragraphs as 56 and 57.

[88]Perpetual Trustee Company Limited (ACN 000 001 007) v Smith [2010] FCAFC 91 (Moore, Dowsett and Stone JJ) and Kuek v Devflan Pty Ltd v Anor [2012] VSC 571 (Kyrou J).

[89][2010] FCAFC 91.

[90]Perpetual Trustee Company Limited (ACN 000 001 007) v Smith [2010] FCAFC 91 at [14] (per Moore and Stone JJ).

[91]Perpetual Trustee Company Limited (ACN 000 001 007) v Smith [2010] FCAFC 91 at [17] (per Moore and Stone JJ, with Dowsett J agreeing).

[92]See especially the guiding principles set out in Perpetual Trustee Company Limited (ACN 000 001 007) v Smith [2010] FCAFC 91 at [13] (per Moore and Stone JJ, with Dowsett JJ agreeing) citing Parker v The Queen [2002] FCAFC 133 at [6] (per Spender, O'Loughlin and Dowsett JJ). In Parker v The Queen [2002] FCAFC 133 at [6] (per Spender, O'Loughlin and Dowsett JJ), the Full Court of the Federal Court found that:

“1.Applications for an extension of time are not to be granted unless it is proper to do so; the legislated time limits are not to be ignored. The applicant must show an “acceptable explanation for the delay”; it must be “fair and equitable in the circumstances” to extend time;

2.Action taken by the applicant, other than by way of making an application for review, is relevant to the consideration of the question whether an acceptable explanation for the delay has been furnished;

3.Any prejudice to the respondent in defending the proceedings that is caused by the delay is a material factor militating against the grant of an extension;

4.However, the mere absence of prejudice is not enough to justify the grant of an extension; and

5.The merits of the substantial application are to be taken into account in considering whether an extension of time should be granted.”

For these reasons, the Plaintiffs’ explanations for the relatively lengthy delay in filing the Summons and Gallichio Affidavit does not, in my view, constitute a reasonable or adequate explanation which would exculpate them in the present circumstances.

Is there an arguable case?

KMS submitted that the Plaintiffs have no substantial point to be argued, and that “[s]een individually or collectively, the complaints made by [the Plaintiffs] and reflected in the proposed grounds of appeal do not give rise to a substantial issue.”[93]
[93]KMS’ Submissions, paragraphs 47 – 48.

The principles on this point have been set out in Peter Schwartz (Overseas) Pty Ltd v Morton:[94]
[94][2003] VSC 144.

“A Substantial Point

14. In Technical Team Projects Pty Ltd v Noble Dunn Pty Ltd[95], Cole J summarised a number of Court of Appeal decisions which considered the circumstances relevant to the determination of an extension of time application in circumstances such as the present. Included in them is the existence of a substantial point to be argued.[96] Ordinarily, this would involve the Court forming some preliminary view of the ultimate prospect of success of the application for leave to appeal which, in turn, would involve an assessment of the allegation that there was a manifest error on the face of the award.[97] I mention this because in the Technical Team Projects case,[98] Cole J appears to be saying that these matters are immaterial to the question whether to extend time except insofar as the Court must be satisfied that the grant of an extension would not be a futile exercise because the questions of law raised are of no substance. If, indeed, his Honour is saying this, it appears to fly in the face of the conclusion he reaches and in the face of the Court of Appeal authority upon which he relies. I mention in particular the passage from the judgment of Kirby P in Galea v New South Wales Egg Corporation.[99] I refer, too, to the unreported decision of our Court of Appeal in Far Eastern Shipping Co Ltd v Abramkin.[100] It would seem that, at the discretion level at least, the Court should have regard to the prospect of success of the point of law in order to weigh against it the factors which would suggest that an extension of time should be refused.”

[95](1990) 20 NSWLR 221.

[96]In the passage from his Honour’s judgment, quoted in Doran Constructions Pty Ltd v Health Administration Corporation of New South Wales (1994) 12 BCL 59 at 61, there is an evident misprint where the point is described as a “specific point” rather than a ”substantial point”.

[97]The alternative basis for leave to appeal, s.38(5)(b)(ii), is not appropriate in this case.

[98](1990) 20 NSWLR 221 at 226-7.

[99]Unreported, Court of Appeal (NSW), 21 November 1989.

[100][1999] VSCA 107 at [3].

For the reasons set out below in relation to the substance of the Leave Application,[101] I find that the Plaintiffs do not have an arguable case insofar as that assessment is a matter weighing in the balance with respect to the application for an extension of time for leave to appeal. This applies, in my view, to both the application for leave to appeal the Award and also the Interim Costs Award.

The extent of prejudice suffered if the extensions are permitted

[101]See paragraphs [88] and following.

The Plaintiffs submitted that:[102]

“There is no specific prejudice [suffered by KMS]. The attempt to explain specific prejudice concerns either the costs orders previously made or the payment of one creditor in preference to another. It has been a long and expensive journey for both parties but they are not relevant factors of prejudice to an extension of time application.”

[102]Outline of Submissions of the Plaintiffs, paragraph 26.

In their written submissions, KMS submitted that it “has suffered prejudice and would be considerably prejudiced if leave is granted.”[103] In support of its contention, KMS submitted that since the Award was made:[104]
[103]KMS’ Submissions, paragraph 35.
[104]KMS’ Submissions, paragraph 36.

“(a) On 21 March 2013 and 22 April 2013, KMS made submissions on costs (Warren affidavit paragraph 22 LAW 16);

(b) On 22 April 2013, the Arbitrator published his Interim Costs Award (DIK 8 to the Affidavit of David Kazatsky affirmed 25 July 2013 in the Enforcement Proceeding);

(c) Between 5 April and the date on which the summons was filed KMS incurred significant costs in respect of the costs award and has had to consider submissions made by [the Plaintiffs] in respect of costs in the arbitration (Warren affidavit paragraph 40 LAW 19) and make further submissions (Warren affidavit paragraph 22 LAW 20);

(d) On 22 April the Arbitrator issued his Interim Costs Award which KMS had to consider;

(e) 23 April 2013, the Arbitrator issued a tax invoice for his services between 8 March 2013 to 23 April 2013, including in relation to the Interim Costs Award, in the sum of $2,940.30 (Warren affidavit paragraph 46 LAW 21);

(f) On 23 April 2013, the Arbitrator accounted for his fees to date, and made a direction that each party pay a further $5,000 security deposit. A copy of that account and direction is LAW 22 (Warren affidavit paragraph 47). That direction was complied with by KMS (albeit late);

(g) On 30 April 2013, Russell Kennedy sent to KMS a tax invoice for its fees and disbursements in the sum of $28,156.92 of which $7,938 (excl GST) related to work conducted after 5 April 2013 (Warren affidavit paragraph 52);

(h) On 21 May 2013 Russell Kennedy directly engaged Ariel Weingart to prepare a bill of costs pursuant to the Interim Costs Award. It would not have done so had it been aware that an application for leave to appeal had been filed (Warren affidavit paragraph 53);

(i) On 31 May 2013, Leonard Warren received an email from Francis Gallichio enclosing the Originating Motion herein (KPM 5);

(j) At that point of time Mr Weingart had already inspected Russell Kennedy’s files for the purpose of preparing a bill of costs and dictated a bill of costs for his secretary to type, and therefore it was too late to do anything about his retainer by Russell Kennedy on behalf of KMS. His fees were $8,518 (incl GST). (Warren affidavit paragraph 55);

(k) On the assumption that no appeal would be brought, on 24 April 2013 Kevin Patrick McNamara a director of KMS and his son Andrew McNamara gave a personal guarantee to Russell Kennedy for a balance outstanding on fees in the sum of $60,000 charged by Russell Kennedy for its servicers [sic] in relation to the Arbitration (Warren affidavit paragraph 48);

(l) On the basis that Russell Kennedy had not been served with any application seeking leave to appeal or any appeal alleging misconduct on 24 April 2013 it released $50,000 to KMS from the moneys paid by [the Plaintiffs]. It would not have done so had it been aware that [the Plaintiffs] had filed an application seeking leave to appeal, notwithstanding the guarantees, as it would have left Russell Kennedy without the reasonable likelihood of a near-term payment of outstanding fees pursuant to the Award, and with a client exposed to further litigation costs (Warren affidavit paragraph 49);

(m) The $50,000 was disbursed by KMS to pay other creditors, and KMS would not have paid them at that time, and left itself, Kevin McNamara and Andrew McNamara exposed to Russell Kennedy’s outstanding and future fees had it known that [the Plaintiffs] had filed an application for leave to appeal, rather it would have asked those creditors for further patience until the litigation had been concluded (Warren affidavit paragraph 50);

(n) KMS has an entitlement to enforce the Award as a judgment of the Court and enter judgment for a sum in excess of $276,417.78. The granting of an extension of time would remove the benefit of that entitlement, at least temporarily;

(o) KMS would be obliged to incur the costs of resisting the application for leave to appeal and even if successful, some part of those costs would fall upon KMS;

(p) KMS is a small company which has suffered financially as a result of this long running and expensive dispute (Warren affidavit paragraph 51). In these circumstances, the grant of an extension of time would impose further hardship upon KMS;

(q) KMS is burdened unexpectedly with the additional strain and uncertainty of this proceeding. (See Aon Risk Services Australia Ltd v Australian National University)

(r)KMS is exposed to further delay in the final resolution of the issue of costs in the arbitration as a result of [the Plaintiffs’] application to the Arbitrator for further time to file and serve its objections, partly premised on its application for leave herein. (Warren affidavit paragraph 68 LAW 29).”

The various aspects of prejudice identified by KMS are related to the Plaintiffs’ delay in not serving the filed Originating Motion on KMS and the Arbitrator “as soon as practicable”[105] and the delay in serving the Summons and Gallichio Affidavit.
[105]See paragraphs [52] – [54] above.

Counsel for KMS also submitted that the Plaintiffs could have effectively saved KMS from suffering prejudice if they had been transparent with their communications with KMS; that is, informing KMS that an originating motion had been issued, but could not be taken further because they were having difficulties as a result of the renovations to the property.[106] It might be said that KMS ought to have been more vigilant in their inspection of the court file to see whether the Originating Motion had in fact been filed. However, that would be an unfair position, in my view, in the present circumstances. The steps that were taken by KMS’ solicitors to inspect the court file were, in my opinion, beyond what was necessary on its or their part – especially when considered in light of the CPA requirements. In this respect, I note, particularly, the following paragraphs from the Warren Affidavit:[107]
[106]Transcript, pp 51 – 52.
[107]Warren Affidavit, paragraphs 30 to 32.

“30 As Mr Gallichio had not confirmed whether or not the Chens had sought leave to appeal, I organised a search of the Court file by an employee of my firm. The search conducted on 8 April 2013 at 3:39 showed that no application seeking leave to appeal had been filed by the Chens. Now produced and shown to me marked ‘LAW 17’ is a copy of the search receipt.

31 On 8 April 2013, Mr Kazatsky informs me, and I believe, that he spoke to Andrew McNamara and reported that our searches of the Court file had shown that no application for leave to appeal had been filed, but that I was still unwilling to release funds as requested, because I remained concerned that the Chens would seek leave to appeal on the grounds of misconduct, and the time for such an appeal would not expire until 42 days after delivery of the Award.

32 On 10 April 2013, I organised a further search of the Court file to determine whether or not the Chens had lodged any application for leave to appeal. My concern was that perhaps Court had not yet processed any such application at the time of the earlier search. The search was conducted at 12.11pm on 10 April 2013, and it showed that the Chens had not filed an application for leave to appeal. Now produced and shown to me marked “LAW 18” is a copy of the search receipt.”

The Plaintiffs submitted that the release of the $50,000 was not prejudicial because that the release was merely a shifting of obligations from one creditor (KMS’s lawyers) to another creditor.[108] With respect to KMS’s appointment of a costing consultant, the Plaintiffs submitted the incurring of costs associated with the appointment is not a question of prejudice and that any additional costs incurred could be remedied by an order for costs.[109] Further, the Plaintiffs submitted that given that the time between the date upon which KMS’s costs consultant received the brief (21 May 2013) and the date when it received a copy of the Originating Motion (31 May 2013) was only ten days – and that the costs consultant had only spent two days on the file by 31 May 2013 – KMS ought to have sought to establish with the Plaintiffs’ solicitors whether the appeal was proceeding and, consequently, whether the costing process should be delayed.[110] That seems to be inconsistent with KMS’ Submissions which were that by 31 May 2013, it was too late to delay the costing process.[111]
[108]Transcript, p 14.
[109]Transcript, p 14.
[110]Transcript, p 14.
[111]KMS’ Submissions, paragraph 36(j).

Counsel for KMS also made reference to the case of Peter Schwartz (Overseas) Pty Ltd v Morton,[112] where Byrne J considered the prejudice that would be suffered if an extension of time for leave to appeal an arbitral award under the Act was granted:
[112][2003] VSC 144.

“Prejudice

…

52. I turn finally to the question whether the extension of time would cause prejudice to the buyer other than that which might be cured by an award of costs. I will state briefly my reasons for concluding that such prejudice does in fact exist in this case.

(1)The buyer has a judgment or an entitlement to enter judgment for a sum in excess of $400,000. The granting of an extension of time would remove the benefit of that judgment, at least temporarily.
(2)The buyer would be obliged to incur the costs of resisting the application for leave to appeal and the s.42 application. Even if successful, some part of those costs would fall upon the buyer.
(3)The principal of the buyer, Peter Lawrence Schwarz, is a man of 74 years who has looked forward to retirement in a reasonable degree of comfort. This has not been possible due to the lack of funds due to this long standing dispute. He says that his health has suffered and that this too is a reason for his wish to retire. In these circumstances, the grant of an extension of time would impose further hardship upon him.”

In my view, the prejudice which would be suffered by KMS if an extension of time were granted with respect to the filing of the Originating Motion, Summons and Gallichio Affidavit includes the following:

· First, KMS has an award in its favour for a sum in excess of $120,000 and a further costs award, both of which it would not be able to obtain the immediate benefit from if extensions of time were granted;

· Secondly, KMS has already disbursed $50,000 to its creditors in the belief that the Award would not be appealed. Certainly, the conduct of the Plaintiffs contributed to this belief, especially making submissions on costs after the date for the filing of the Originating Motion had elapsed.[113] However, the payment of debts on the basis of reasonably anticipated receipts of money is a commercial decision that can, in numerous ways, impact a business and its relationships if that reasonable anticipation is not realised. To say that there would be no prejudice suffered is, in my view, a very narrow view of the realities of commercial arrangements.

· Thirdly, KMS engaged a costs consultant to prepare a bill of costs pursuant to the Interim Costs Award. KMS submitted that the costs consultant would not have been engaged had they been aware of the Originating Motion. Certainly, in my view, KMS’ engagement of the costs consultant could not be described as being premature given that it did so after the time period to lodge an appeal from the Interim Costs Award had lapsed.

[113]Warren Affidavit, paragraph 38.

As a further observation, once KMS received a copy of the filed Originating Motion, no further prejudice can be said to have been suffered by KMS with respect to the further delay of the filing of the Summons and the Gallichio Affidavit, as it was, in a sense, inevitable, or reasonably to be expected, that a summons and supporting affidavit would be filed and served.

Application of the Civil Procedure Act

KMS’ submissions also allege that the Plaintiffs have failed to comply with their “overarching obligations” under the CPA. The CPA applies to these proceedings[114] and the Plaintiffs, as parties to the proceedings, are obliged to comply with a variety of provisions contained in that Act.[115] In particular, KMS submitted that the Plaintiffs’ conduct involved a contravention of the following provisions of s 25 of the CPA:
[114]Civil Procedure Act 2010 (Vic), s 11(b).
[115]Civil Procedure Act 2010 (Vic), s 10(a).

“25.Overarching obligation to minimise delay

For the purposes of ensuring the prompt conduct of a civil proceeding, a person to whom the overarching obligations apply must use reasonable endeavours in connection with the civil proceeding to –

(a) act promptly; and

(b) minimise delay.”

In determining whether the Plaintiffs have breached s 25 of the CPA, the Court must have regard to ss 7 and 8, and in particular s 9. If the Court finds that an overarching obligation has not been met then it can exercise powers provided under s 29, which, as KMS submitted,[116] includes the power to make “any order it considers appropriate in the interests of justice including…any other order that the court considers to be in the interests of any persons who has been prejudicially affected by the contravention of the overarching obligations.”[117] Under s 29, the Court need only find “on the balance of probabilities” that Plaintiffs have breached s 25 before it may make an order.
[116]KMS’ Submissions, paragraph 46.
[117]Civil Procedure Act, s 29(1)(f).

In relation to this point, I refer to Kyrou J’s decision in Kuek v Devflan Pty Ltd[118] where a not too dissimilar circumstance arose. Mr Kuek, who was also an experienced litigation lawyer, had been a party to a protracted dispute which had its genesis in repair costs performed on his motor vehicle. The issue before Kyrou J was whether an extension of time should be granted to Mr Kuek to appeal a costs order made against him. With respect to a claim that Mr Kuek had breached, amongst other things, s 25 of the CPA. Kyrou J found against Mr Kuek, having said:[119]
[118][2012] VSC 327.
[119][2012] VSC 327 at [68] et seq.

“68 The overarching purpose of the [CPA], as set out in s 7(1), is ‘to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’. Under s 8(1), the Court must seek to give effect to the overarching purpose in the exercise of any of its powers or in the interpretation of those powers. Pursuant to s 9(1), the Court must have regard, among other matters, to the efficient conduct of the business of the Court, the efficient use of judicial resources and the timely determination of the civil proceeding. Section 9(2) provides that the Court may have regard, among other matters, to the degree of promptness with which the parties have conducted the proceeding and the degree to which they have complied with the overarching obligations.

…

70 Mr Heath submitted that Mr Kuek has breached his overarching obligations under ss 20, 21, 24 and 25 of the Act and that, pursuant to s 28, the Court should take those breaches into account in determining whether to grant the defendants’ application to set aside the Notice. …

71 It is arguable that Mr Kuek’s behaviour in conducting the taxation of costs in the period from 14 October 2011 until March 2012 without informing either the Court or the defendants of his intention to seek a review of Wood AsJ’s order of 29 September 2011 under r 63.57 of the Rules constituted a failure to cooperate with the defendants and with the Court. It is also arguable that the same behaviour misled the defendants, in the sense that it induced a belief that Mr Kuek would not seek a review of the order. In the light of my conclusion below regarding s 25 of the Act, it is not necessary for me to reach a final view on whether Mr Kuek breached ss 20 and 21 of the Act.

…

73 In relation to s 25 of the Act, the matters to which I have referred at [32] to [43] above clearly demonstrate that Mr Kuek has failed to act promptly and to minimise delay in pursuing his professed desire to have Wood AsJ’s order of 29 September 2011 reviewed pursuant to r 63.57 of the Rules. Mr Kuek was required to file and serve the Notice by 13 October 2011. A party that purports to post a document to the Court for filing on the day after the document was required to be filed under the Rules does not act promptly and does not minimise delay. Further, a party that is anxious to protect its interests complies with the time limits imposed by the Rules and acts promptly once it realises that a step has not been taken in accordance with those time limits. I reject Mr Perkins’ submission that, having posted the Notice to the Prothonotary’s office, it was appropriate for Mr Kuek to wait until the sealed Notice was returned.

74 If Mr Kuek had realised on 14 October 2011 that the deadline for the filing of the Notice had already passed, he would have arranged for an employee to attend the Prothonotary’s office personally to file the Notice rather than posting it. Mr Kuek has not explained why he did not do so. Nor has he explained why he took no steps until February 2012.

75 Not only is Mr Kuek’s lack of action inconsistent with s 25 of the Act, his failure to explain to the Court why he took no action constitutes a failure to provide such information as the Court requires to properly decide whether to grant him the indulgence that he seeks.

76 In my opinion, Mr Kuek’s conduct constitutes a breach of s 25 of the Act and it is appropriate for me to take that breach into account in deciding whether to grant him an extension of time and whether to grant the defendants’ application to set aside the Notice.

77 Mr Perkins was dismissive of the defendants’ contentions that Mr Kuek had breached the Act. He made a broad-brush submission that the Act contains generalities and ‘rhetoric’ and that its ‘fundamental intent ... is that justice be done’.

78 I reject Mr Perkins’ submissions. The Act does not contain generalities and rhetoric. Nor does it deal with abstract concepts of justice. The Act imposes specific statutory obligations on the Court, the parties to civil litigation, the lawyers acting in civil litigation and other persons involved in litigation such as expert witnesses. It seeks to ensure that civil litigation is conducted in a just, efficient, timely and cost effective manner and it gives the Court wide powers to make orders limiting the rights and remedies that are otherwise available to a party if that party breaches its obligations under the Act.

79 The Act must be taken seriously by litigants and their lawyers. In an appropriate case, the Court is entitled to – and will – say to a party seeking to enforce its rights in a manner that is antithetical to the overarching purpose and to that party’s overarching obligations that ‘enough is enough’, and will act to curtail those rights in the interests of the administration of justice.”

These statements and findings of Kyrou J are, in my view, very relevant to these proceedings. The obligations under the CPA must indeed be taken seriously by litigants and their lawyers. The material before the Court demonstrates, in my view, that the conduct of the Plaintiffs with respect to this entire appeal process has been most unsatisfactory. I refer, in particular, to the submissions of KMS in this respect, that the Plaintiffs:[120]
[120]KMS’ Submissions, paragraph 42.

“(a) [Appear] to have issued a ‘holding’ Originating Motion, pending a final decision on whether or not to proceed with its application for leave to appeal;

(b) decided not to inform KMS that the Originating Motion had been filed;

(c) allowed KMS to incur further costs associated with the arbitration notwithstanding that it knew that KMS did not know that it had filed its originating motion;

(d) allowed the Arbitrator to proceed with the arbitration without advising the Arbitrator that it had filed its Originating Motion contrary to the requirement of the Rules;

(e) preferred its own private and business interests to those of the Court and the other parties;

(f) decided not to progress its application for leave to appeal until faced with an enforcement application; and

(g) failed to comply with relevant Practice Notes and Rules.”

Counsel for KMS further submitted that, with the advent of the CPA, it is no longer appropriate that “a party and those advising that party can simply put forward a position trying to protect their client’s interests or hedge their bets. Putting it in a holding position and decide whether or not it’s in their interests for one reason or another…”;[121] assuming that this position was ever appropriate.[122]
[121]Transcript, p 52.
[122]See, for example, White Industries (Qld) Pty Ltd v Flower & Hart (a firm) [1998] FCA 806.

I find KMS’ submissions to be compelling and supported by the material before the Court to which reference has been made. On this basis and having regard to the manner in which these proceedings have been conducted by the plaintiffs, I find, on the balance of probabilities, that the Plaintiffs have breached their overarching obligation as set out in s 25 of the CPA.

Other factors

As the authorities indicate, the general factors that are to be considered when determining if an extension of time ought to be granted are not meant to be exhaustive. In the context of the Plaintiffs’ submissions, I infer that they are submissions directed to the general discretion of the Court to dispense with procedural time limits in the interests of justice. The Plaintiffs submitted that:[123]
[123]Outline of Submissions of the Plaintiffs, paragraphs 23 and 27.

“23. The parties have undertaken hearing an interim award, on appeal and further appeal from an interim award, and an award (following a seven day hearing), an interim award on costs and now an application for leave to appeal. The Court may infer from this, arduous litigation has taken its toll financially and emotionally on all parties. These are matters unrelated to lateness.

…

27. The grounds of the appeal and the questions of law raised in the notice are matters of significant financial importance, which in turn will have any effect an order for costs (which currently amounts to an order for Supreme Court Scale Costs).”

An application of this kind is, inherently, rather nebulous unless its basis or bases are clearly identified. Moreover, “the interests of justice” is not synonymous with the interests of the party advancing the claim. There must be a broader perspective which accommodates, particularly in the circumstances of these proceedings, the position of the other party or parties and prejudice suffered or which may be suffered if the position argued for on this basis were accepted. Here, nothing of the kind has occurred – the basis or bases are not clearly identified, save that it is said that there has been arduous litigation and the issues of law raised are of significant financial importance. Even if these submissions were accepted, they do not, in my view, establish any relevant basis or bases for dispensation of time limits in the interests of justice as they fail to address the broader perspectives, as indicated. In particular, the manner in which the Plaintiffs conducted the proceedings, the breach of their overarching obligation under s 25 of the CPA and the prejudice to KMS makes it anything but in the interests of justice, in my opinion, to accept the Plaintiffs’ submissions in this respect.

Findings

For the preceding reasons, I will, with respect to the extension of time application, proceed as follows.

Originating Motion

I will make an order granting the Plaintiffs an extension of time to file the Originating Motion late. The Plaintiffs’ delay in filing the Originating Motion was only a short delay (whether it was three or five days does not make much of a difference in all the circumstances). It appears that the real concern with respect to r 4.06 of the Chapter II – Rules was the Plaintiffs’ delay in serving the Originating Motion on KMS and the Arbitrator. Indeed, had the Originating Motion been served “as soon as practicable”, it is most likely that any prejudice that KMS suffered would not have arisen. However, issues arising from a delayed service of an originating motion do not impinge upon the determination whether an extension is to be granted to file the originating motion out of time. This is clear from the mechanics of the sub-provisions under r 4.06 of the Chapter II – Rules. Within r 4.06 there are, effectively, two different time periods that need to be considered. The first is the time period for filing an application by way of an originating motion (i.e. the twenty-eight day period): r 4.06(1). The second is the time period for serving the originating motion upon the respondent party (as soon as practicable): r 4.06(2). They are two distinct time periods and need to be considered separately.

In my opinion, when the Arbitrator’s reasoning as set out in the Award is considered in context, his statements with respect to estoppel were quite general and are more reasonably read, in my view, in the context of his taking account of all evidence concerning the circumstances with respect to the issue of parties to the contract as contemplated by Pagone J in Mediterranean Olives Financial Pty Ltd v Lederberger.[174] In any event, the estoppel issue is not critical because, as I have indicated, the Arbitrator was not, in my view, in error in the conclusion he reached in relation to Mrs Chen’s status as a contracting party on the basis of the evidence before him. On the basis of this evidence, it was not necessary for the Arbitrator to examine the issue of estoppel and I think this is the position which he indicated in concluding the discussion of this issue.[175]

Ground 6

[174][2011] VSC 301, paragraphs [5] and [7], and see above, paragraph 101.

[175]See Award, paragraph 53.

In relation to awareness of the detailed conditions of the planning permit, the Arbitrator made the following finding:[176]

“I have come to the conclusion that KMS was aware of the stamped drawings and general conditions of the planning permit. However, I am not convinced that KMS was necessarily aware of the detailed conditions of the planning permit. Mr Chen said he had not given the document with these conditions to KMS and the evidence indicates that he did not bring these conditions to KMS’ attention.”

The finding that KMS was unaware of the conditions of the planning permit is challenged in this proposed ground on the basis that it is “contrary to the evidence and inconsistent with incontrovertible evidence”; hence is an error of law.

[176]See Award, paragraph 111.

I am of the opinion that the Arbitrator’s finding on this issue is a finding of fact. In my view, this position is made very clear when regard is had to the evidence which the Arbitrator relied upon to make this finding; as set out in detail in the Award.[177]
[177]See Award, paragraphs 102 to 112 (pp 18 and 19).

I accept that the evidence is consistent with the conclusions that:

· the Plaintiffs had a full copy of the planning permit, including the detailed conditions;[178] and

· KMS had a copy of part of the planning permit, which included the stamped drawings and general conditions, but not the detailed conditions.[179]

Grounds 7 to 10

[178]See Award, paragraphs 103, 106 to 109; and the evidence relied upon for the conclusion set out in paragraph 110 of the Award is set out in detail.

[179]See Award, paragraphs 104 and 105 where detailed evidence relied upon as demonstrating the conclusion reached in this respect it set out. The conclusion is set out at paragraph 111 of the Award.

Although I have found that there is no basis to doubt the Arbitrator’s finding that KMS was unaware of the detailed conditions of the planning permit. It is, nevertheless, necessary to say something in relation to proposed Grounds of Appeal 7 to 10. These grounds are, as submitted by KMS, merely different ways of the Plaintiffs contending that there was an implied term, a duty of care or a statutory duty on the part of KMS that it comply with the detailed conditions in the planning permit. This is consistent with the approach taken by the Plaintiffs in submissions with respect to these grounds, namely that they raised two parts to the question whether KMS breached an implied term:

(a)whose obligation was it to obtain a permit and/or Melbourne Water’s approval; and
(b)whose obligation was it to carry out work complying with the permits?[180]

[180]See Outline of Submission of the Plaintiffs (15 August 2013), paragraphs 59 and following.

On the basis of this analysis of the question raised for consideration by the Arbitrator, the Plaintiffs submitted that the Arbitrator had fallen into error by not addressing questions with respect to the implication of a term and the imposition of a duty separately. It was said to be an error in itself to conflate the two principles because “… it is very difficult to determine what reasons concern the implication of a term separately from a duty. This is an error in itself to conflate the two matters as the reasons are now quite obscure”.[181] The bases of this conclusionary submission are set out in the Plaintiffs’ submissions.[182] In my opinion, for reasons which follow, the substantive issues raised by the Plaintiffs in this respect are adequately dealt with by the Arbitrator and disclose no relevant error. Further, I do not accept, again for the reasons which follow, that the Arbitrator was in error in conflating legal principles or the manner in which he dealt with legal principles or issues, either generally or because this produced reasons which made it difficult to understand how he had dealt with each of these particular principles or issues. In my view, the Arbitrator’s reasoning is, relevantly, quite clear in both respects. Consequently, I reject the submission of the Plaintiffs that “manifestly” the Arbitrator “(a) misapplied the law with respect to the implication of terms; and (b) failed to determine the question referred to him”.[183]
[181]See Outline of Submission of the Plaintiffs, paragraph 68.
[182]In the Outline of Submission of the Plaintiffs (15 August 2013), the detailed submissions are as follows:
“62.The arbitrator found:
(a)at [114(d)] and [237(e)a.] of his Award the first defendant was not required to do anything with respect to the [permit] conditions;
(b)at [238], the plaintiffs were responsible at law and under the Contract for obtaining the planning permit and for ensuring that the works complied with the planning permit.
63.The arbitrator appears to have relied upon those two findings when he determined:
(a)the first defendant did not breach the Terms of the Contract by removing the rough barked apple tree (Award [132]);
(b)the first defendant did not breach the terms of the Contract by locating the tennis court partly outside the location shown in the plans (Award [143]);
(c)the first defendant did not breach the Contract by planting the Canary Island Palm trees in contravention of the planning permit (Award [152]);
(d)the first defendant did not breach the Contract by placing Dromana rock on and along the riverbank in contravention of the landscaping plan attached to the planning permit (Award [170]);
(e)the first defendant did not breach the Contract by cutting the riverbank (Award [183]).
64.The path of logic in arriving at this finding alludes to the law for implication of terms, where expressly at [231] of the award the arbitrator says ‘the contract is silent on compliance with the planning permit but common sense suggests that works should not be carried out in contravention of a planning permit’. However, this award gives no clear path of reason for the conclusions reached.
65.The question of the requirement to obtain a permit is addressed at part 3.2 [113]-[114] of the Award. See in particular [113] where the arbitrator says he addresses responsibility for obtaining … approvals.
66.The arbitrator says at [114] page 22 of the Award that a distinction may be drawn between compliance and obtaining, the first defendant was not contractually bound to do anything with respect to these conditions – meaning, we say with respect to obtaining.
67.The arbitrator does not then proceed to determine obligation concerning compliance until Part 6.1 [230]-[235], 6.2 [235]-[242] and [249] of his award.”
[183]See Outline of Submission of the Plaintiffs, paragraph 80.

The real problem for any argument on the part of the Plaintiffs that any obligation lay on KMS on any of these bases is that this would not assist the Plaintiffs having regard to the Arbitrator’s findings that:[184]
[184]See Award, paragraph 239.

· the Plaintiffs took full responsibility for obtaining the planning permit;

· KMS told Mr Chen that his instructions would lead to works being done contrary to the planning permit;

· the Plaintiffs took onto themselves responsibility for complying with the planning permit; and

· the Plaintiffs repeatedly instructed KMS to proceed with the works despite receiving KMS’s advice that this was unwise and in contravention of the planning permit.

It follows that it is not necessary to form a view on whether there were the implied terms or duties as contended for by the Plaintiffs because, having regard to the Arbitrator’s findings on these factual matters, the Plaintiffs had clearly waived any obligation of compliance with the detailed conditions in the planning permit on the part of KMS. Consequently, it is not possible for the Plaintiffs to satisfy the requirements of s 38(5)(a) of the Act in this respect. In my view, this disposes of the issues raised by the Plaintiffs in proposed Grounds 7 to 10. In particular, this disposes of arguments raised by the Plaintiffs that the Arbitrator did not address the question whether, by carrying out the works in contravention of the permit, KMS had breached any duty of care.[185] Having regard to the reasoning and findings of the Arbitrator, the issues raised by the Plaintiffs with respect to obligations which it was submitted KMS bore and breached in carrying out the works simply do not arise. Consequently, there is, in my view, no relevant error on the part of the Arbitrator in his reasoning with respect to these issues.
[185]See Outline of Submission of the Plaintiffs, paragraphs 84 to 91.

Both the Plaintiffs and KMS did, however, address, in some detail, the particular issues arising under each of these grounds. Consequently, it is desirable to make some reference at least to the particular matters raised.

Ground 7

The findings of the Arbitrator with respect to matters raised on the proposed Ground 7 are as follows:

· KMS was not contractually bound to obtain a planning permit as it had already been obtained by the Plaintiffs prior to the tennis court contract being executed;[186]
[186]See Award, paragraphs 114(a) and 231.

· the Code of Practice – Private Tennis Court Development Revision 1 did not make any reference to conditions that may be contained in the planning permit … and was not contractually binding on the parties as it was not mentioned or referenced in the contract;[187]
[187]See Award, paragraph 232.

· the Guide Specifications for Tennis Court Construction were not contractually binding on the parties as they were not mentioned or referenced in the contract and were outdated;[188]
[188]See Award, paragraph 233.

· the planning permit required certain approvals to be obtained from Melbourne Water;[189]

· KMS was not contractually bound to do anything in regards to the Melbourne Water and Parks Victoria conditions of the permit;[190] and

· the Plaintiffs were responsible to obtain the permissions from various authorities for specific works and for ensuring that the works complied with the planning permit.[191]

[189]See Award, paragraph 113(g).

[190]See Award, paragraphs 114(d) and 242.

[191]See Award, paragraphs 114(d), 238, 239 and 240.

In relation to these findings, the Award indicates that the Guide Specifications pre-dated the Code of Practice by some years and “was intended as a guide to assist prospective tennis court owners in particular, and to provide guidelines for minimum standards”.[192] The Code of Practice – Private Tennis Court Development Revision 1 contained, the Arbitrator found, objectives “… to provide a framework for what is required to enable a planning permit to be obtained. It makes no reference to conditions that may be contained in the planning permit”.[193] The Code is premised on there being no need for a planning permit if all the requirements of the Code are met. Consequently it does not purport to stipulate conditions that may be contained in a planning permit for a tennis court. In any event, a planning permit had been obtained prior to the tennis court contract being entered into.[194]
[192]See Award, paragraph 233.
[193]See Award ,paragraph 232.
[194]See Award, paragraphs 114(a) and 232.

The contract contained no express term to the effect contended for by the Plaintiffs in paragraph 7(a) (as secondly appearing) in the proposed Grounds of Appeal; namely that KMS was required to obtain “permission” from Melbourne Water for works on the banks of the Yarra River, and in close proximity to the banks, before starting the works. In this respect, the Plaintiffs’ contention that such a term ought to be implied was rejected by the Arbitrator, who drew a distinction between an obligation to obtain a planning permit, where one had not previously been obtained, and the obligation to comply with the conditions of a planning permit; if such conditions had been made known to KMS.[195]
[195]See Award, paragraph 114(d).

In my view, there is no basis for contending that the Arbitrator misapplied the application of legal principles for the implication of terms. In context, it is clear that the term contended for could only be implied if the requirements stated in BP Refinery (Westernport) Pty Ltdv Shire of Hastings[196] were met, namely that the implied term:

(a)must be reasonable and equitable;
(b)must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it;
(c)must be so obvious that “it goes without saying”;
(d)must be capable of clear expression; and
(e)must not contradict any express term of the contract.

[196](1997) 180 CLR 266 (PC).

As none of the conditions specified in paragraphs (a) to (c) and (e) were or apparently could be met by the Plaintiffs, the term contended for could not be implied. Further, the term sought to be implied is contrary to the finding by the Arbitrator that the Plaintiffs took full responsibility for compliance with the planning permit.[197] In my opinion, there is nothing to suggest that the reasoning in support of this finding on the part of the Arbitrator is erroneous.
[197]See Award, paragraph 239. The underlying reasoning in support of this finding is, in my view, both adequately set out in paragraph 239, cross-referenced to Sections 3.1, 3.2 and paragraphs 108, 136(e) and 149.

Consequently, there was no basis for supposing that the Arbitrator was not correct in finding that neither the Guideline Specification nor the Code of Practice – Private Tennis Court Development Revision 1 was incorporated into the contract. Further, the requirements of s 38(5)(a) of the Act are not satisfied with respect to this proposed Ground, particularly having regard to the concluding reasoning of the Arbitrator in this respect.[198]

Ground 8

[198]See Award, paragraphs 239 and 240.

The allegations underpinning this proposed Ground are, in a sense, the other side of the same coin in terms of the issues raised in proposed Ground 7. The Plaintiffs alleged that KMS failed “… to perform its obligations in a proper and workmanlike way and, in particular, with the degree of skill and care to be expected of a reasonably competent builder”. As is clear, this is an allegation of a duty of care, rather than an implied term.

The Arbitrator rejected the alleged duty on the basis that the Plaintiffs had not made any substantive allegations of faulty workmanship or other factors that would support the allegation, other than issues with respect to matters such as complying with the permit, screw piling and delays.[199] The Arbitrator observed that he had already rejected the Plaintiffs’ claims with respect to these matters.[200] In my opinion, there is no basis for thinking that the Arbitrator had made any relevant error in rejecting the alleged duty by reference to his earlier findings. In any event, this proposed Ground does not satisfy the requirements of s 38(5)(a) of the Act.
[199]See Award, paragraph 239(c).
[200]See Award, paragraph 239(c).

It was also submitted by KMS that the duty contended for by the Plaintiffs extended beyond the allegations pleaded in paragraph 39 of its defence and counterclaim; namely that KMS owed the Plaintiffs a duty of care in tort to exercise all reasonable skill, diligence, competence and care and planning, executing and performing the works under the various contracts. It was submitted that it was now too late for the Plaintiffs to contend for the alleged duty of care and, in any event, it was open to the Arbitrator to reject the alleged duty. More particularly, it said that a duty of care to comply with the Code or Guidelines ought not to be imposed upon KMS in circumstances where the Plaintiffs obtained a permit prior to the contract and assumed responsibility for its compliance. In my opinion, this must follow from the finding of assumption of responsibility by the Plaintiffs. Additionally, I accept that it was open to the Arbitrator to reject the allegations of a breach of duty in view of previous findings with respect to the actions of the Plaintiffs and KMS during the performance of the works to the effect that KMS warned the Plaintiffs of the risks associated with the failure to comply with the planning permit and that the Plaintiffs assumed responsibility for any non-compliance.[201]

Grounds 9 and 10

[201]See Award, paragraphs 239 and 240.

These proposed Grounds are sought to be supported by the Plaintiffs on the basis of its contentions that the Arbitrator erred in his interpretation of provisions of the Planning and Environment Act 1987 and the Water Act 1989.

In relation to the Planning and Environment Act, the Plaintiffs contend that the Arbitrator’s error was in finding that this legislation made no reference to the responsibility of builders or contractors to comply with planning permits. Reliance was placed upon ss 126(1) and 126(3) of that legislation, particularly the former, which provides that “[a]ny person who uses or develops land in contravention of or fails to comply with a planning scheme, or a permit, or an agreement under s 173 is guilty of an offence”.

The Arbitrator set out reasons for his construction of the Planning and Environment Act, stating that the legislation “makes no reference to responsibilities of builders or contractors to comply with planning permits and does not stipulate any penalties on such people for such contraventions.”[202] The Arbitrator also noted in the course of his reasons in this respect that the argument with respect to this legislation had not been developed further by the Plaintiffs, as the Arbitrator had invited them to do; save as set out in s 6.1 of the Award, in support of the implication of a contractual term or duty of care.[203]
[202]See Award, paragraph 237(b).
[203]See Award, paragraph 237(c) and (d).

In my view, the construction of the Planning and Environment Act adopted by the Arbitrator was reasonably open to him. I also accept that even if the legislation were to be construed as contended for by the Plaintiffs, it would not follow that a contractual term or duty of care in the same terms would arise. This is particularly so having regard to the findings made by the Arbitrator that the Plaintiffs undertook full responsibility for obtaining and complying with the planning permit and, consequently, for any non-compliance with it.[204]
[204]See Award, paragraphs 239 and 240.

In relation to the Water Act, the Arbitrator found that “It is in broad terms and that there is nothing in it that is directly relevant to the issues raised in this arbitration or that further illuminates this arbitration in any detail”.[205] The Plaintiffs, on the other hand, seek to rely upon s 208 of the Water Act, particularly sub-ss (1) and (4). Section 208 relates to the erection of structures in certain floodway areas. In my view, the Arbitrator’s approach to the construction of this legislation was reasonably open to him and particularly in circumstances where there was no evidence that any of the pre-conditions to the application of the provisions upon which the Plaintiffs rely, namely s 208, had been satisfied.
[205]See Award, paragraph 235.

There was also an additional point in relation to the Water Act issue as the Arbitrator’s treatment of this issue concluded with the following statement: “Therefore, I have determined that there is no point in going further down this burrow and, in order to minimise costs to the parties, I have decided not to request any further submission from KMS on this particular issue and to strike out this reference to the Water Act from MJC’s submission”.[206] In my view, it was clearly open to the Arbitrator to rule that it was too late for fresh issues to be raised by the Plaintiffs in relation to the Water Act. In any event, even if the legislation were to be construed as contended for by the Plaintiffs, it does not follow that a contractual term or duty of care in the same terms arises, particularly having regard to the Arbitrator’s findings that the Plaintiffs undertook full responsibility for obtaining and complying with the planning permit and for any non-compliance with it.[207]

Ground 11

[206]See Award, paragraph 235 (the sentence immediately following the passage previously quoted from paragraph 235).

[207]See Award, paragraphs 239 and 240.

This proposed Ground raises the question whether the Arbitrator was in error in construing the last dot point of clause 4 of the “Standard Conditions of Agreement” that forms part of the contract that states that “The Owner shall pay the Contractor: … Interest at the rate of 18% per annum calculated until payment on a daily basis in respect of any moneys due under this agreement, but not paid by the due date”.[208] The Arbitrator’s finding on this issue is set out in the Award as follows:[209]
[208]See Award, paragraph 281.
[209]See Award, paragraph 288. KMS notes in its submissions (paragraphs 144 and 145) that by email dated 14 January 2013, the Arbitrator invited KMS to make a submission within seven days on the issue of the method of calculating interest payable. MJC, on the other hand, did not make a submission in response, contending that compound interest was not payable pursuant to that clause.

“With respect to the question as to whether or not interest should be calculated as compound interest on a daily basis, I uphold KMS’ submission and note that this point was not defended by MJC”.

It appears that the approach adopted by the Plaintiffs in the course of the arbitration was to argue that this provision was a penalty, rather than address itself to the manner in which interest was to be calculated. The gravamen of its submission are set out in the Award:[210]
“In its submission dated 21 December 2012, MJC submitted that the 18% per annum rate of interest would be a penalty and stated relevantly that “In this case, the sum of 18% per annum is charged on interest for outstanding payments. No evidence was tendered before the Court to establish what costs would be incurred by KMS being out of its money. There was no evidence before the Arbitrator that would establish that KMS’ loss of use of money would amount of [sic] 18% per annum. This is an excessive amount that does not reflect any proven pre-estimate of loss”.

The Plaintiffs’ submission went on to say:
“In the circumstances, the Arbitrator’s jurisdiction regarding the payment of interest is set out at s 31 of the Commercial Arbitration Act 1984”.

[210]See Award, paragraph 284.

The Arbitrator concluded that the provisions of the Act “envisages the situation where parties have agreed an interest rate in their contract and requires the Arbitrator to consider the agreed rate”.[211] The Arbitrator concluded:

“Accordingly, I determine that the interest rate to be paid by MJC on amounts due to KMS under the contract in this Award is 18% per annum compounded on a daily basis commencing on the due date of the relevant invoice”.

[211]See Award, paragraph 287.

In my opinion, there is no basis for thinking that the Arbitrator was in error in his application of the provisions of the Act and, consequently, his conclusions in relation to liability for interest under the provisions of the contract is purely the result of his construction of the relevant terms. It is clear that the basis upon which interest is payable under an agreement is a question of construction; and there is no presumption in favour of simple or compound interest.[212]
[212]The Court of appeal said in Morton v Elgin-Stuczynski [(2008) 19 VR 294, at 300, [27] and [28] (Neave JA, with whom Kellam JA and Cavanough AJA agreed)]:
“Whether interest is to be calculated on a simple or compound basis depends on the true construction of the contract, read in the light of surrounding circumstances.
Whatever may have been the case historically, today there is no presumption that interest payable on a loan made by a private lender is to be calculated as either simple or compound interest.”
And see Shepparton Projects Pty Ltd v Cave Investments Pty Ltd [2011] VSC 384 at [14] and following (Croft J); and, on appeal, [2013] VSCA 152.

In relation to construction questions in this context, KMS submitted:

“Where a question of construction is specifically referred, or is the very question referred, to arbitration, the decision of the arbitrator on that point cannot be set aside because the court would have come to a different conclusion unless it appears on the face of the award that the arbitrator has acted illegally, eg, by deciding on the evidence which is inadmissible or on principles of construction which the law does not countenance: Thoroughvision Pty Ltd, (supra) at [49] [Tab 5]
‘49 In my opinion, the issues for determination as specified in cl 2 of the Deed of Arbitration and the documents to which reference is made make it clear that this arbitration concerns a reference of a question of construction of a document to an arbitrator, and in this case a person well qualified for such a task. Consequently, on the basis of the authorities to which reference has been made, including Melbourne Harbour Trust Commissioners v Hancock, it is entirely inappropriate for this court, in effect, to re-open the whole arbitration for the purpose of forming its own view as to the proper construction of the relevant provisions of the MOU and, on that basis, deciding whether the Arbitrator has made an error of law on the face of the Award. As this process would be inappropriate and is not open, I am of the opinion, for the reasons indicated, that the Award does not disclose any manifest error on its face with respect to the construction of the relevant provisions of the MOU and, consequently, it would not be appropriate to grant leave to appeal under s 38(5) of the Act.’ (emphasis added)

As these submissions indicate, it is clear on the authorities that there was no manifest error in an arbitrator’s award in circumstances where the question at issue is one of construction, even if the court would or may have come to a different conclusion on that question. On this basis and more generally there is, in my view, no basis for any finding of error with respect to the Arbitrator’s construction of these provisions.

The Plaintiffs, in their submissions in relation to this proposed Ground, also added that Hungerford’s[213] damages were not claimed or proved.[214] However, having regard to the preceding reasons in relation to this proposed Ground, I do not regard this as of significance in this context. There is a very distinct difference between an entitlement to compound interest under contractual provisions, properly construed, and issues arising in relation to Hungerford’s damages.

Ground 12

[213]Hungerford’s v Walker (1989) 171 CLR 125.

[214]See Outline of Submission of the Plaintiffs, paragraph 97.

This proposed Ground raises the question whether or not the Arbitrator was functus officio on the question of costs after making the Award. The Plaintiffs made extensive submissions in relation to the question whether the Arbitrator was functus officio at this point.[215] For the reasons which follow, I am of the opinion that these submissions are misconceived and that a fair reading of the Award with respect to costs indicates, quite clearly, that the issue had not been finally determined.
[215]See Outline of Submission of the Plaintiffs, paragraphs 102 to 112.

In essence, this issue arises out of a determination with respect to costs which is contained in the concluding section of the Award.[216] In order to give this determination context it is desirable to set out Chapter 3 (Reasons), Section 10 of the Award, as follows:
[216]Paragraph 297.

“10) Costs Award
292.I have upheld a significant proportion of the claims made by KMS and made monetary awards payable by MJC to KMS.
293.I have dismissed MJC’s Defence and Counterclaim.
294.Hence, KMS is the successful party in this arbitration.
295.I have taken note and followed the finding of the Court of Appeal in Chen & Anor v Kevin McNamara & Son Pty Ltd & Anor [2012] VSCA 229[217] which rejected KMS’ submission that costs of the Court proceedings should be awarded on an indemnity basis and awarded them on a party/party basis. In so doing, His Honour, Justice Redlich JA, discussed the way costs are usually dealt with saying ‘11) Though costs are always a matter in the court’s discretion, costs awarded to a successful party are usually party and party costs[218] in the absence of conduct warranting the making of a more onerous order or a contractual basis for enlarging the costs entitlement.[219]’
[217]I advised the parties that I would be referring to this case by email dated 5^th February 2013.
[218]Re Queen’s Hotel (Cardiff) Ltd [1900] 1 Ch 792; Commonwealth Bank of Australia v Aspenview Productions Pty Ltd [2001] VSC 499, [18] (McDonald J).
[219]Re Shanahan (1941) 58 WN (NSW) 132, 134 (Street CJ); Sandtara Pty Ltd v Australian European Finance Corporation Ltd (1990) 20 NSWLR 82, 97-8, (Cole J); AGC (Advances) Ltd v West (1984) 5 NSWLR 301, 304 (Hodgson J).
296.Given that I have not upheld all of KMS’ claims, this Award shows that aspects of MJC’s defence were arguable and were not frivolous or vexatious.
297.Accordingly, I have determined the following with respect to costs of the arbitration:
a)The Costs Award will follow the event.
b)Costs will be awarded on a party/party basis.

298.The parties will be directed to make written submissions on the details of the Cost Award to enable me to finalise the Costs Award on this basis.”

In my view, it is quite clear that the extent to which the Arbitrator had resolved the costs position at the time of publication of the Award was as to the basis for the awarding of costs; namely that costs would follow the event and that costs would be awarded on a party and party, rather than an indemnity, basis. Otherwise the position on costs had not been finally determined.[220]
[220]See Abb Service Pty Ltd v Pyrmont Light Rail Co Ltd (BC 2010 05359 at [56], [70]-[72]).

Accordingly, there is no basis for finding any error in this respect and, in any event, the test in s 38(5)(a) of the Act could not be met because the same substantive result was reached in the Award and the Interim Costs Award, save that the Award is silent as to who will conduct the assessment and how it will be conducted, whereas the Interim Costs Award addresses these issues. Additionally, no application has been made for leave to appeal the Interim Costs Award and the time for doing so has now expired.

Conclusions on the Leave to Appeal the Award and the Interim Costs Award

For the preceding reasons, I am not satisfied that any basis for the grant of leave to appeal the Award has been established as required by the provisions of s 38(5) of the Act.

Additionally, I am of the opinion that none of the questions of law raised by the Plaintiffs satisfy the test established by the provisions of s 38(5)(b)(ii) of the Act as the contract is a one-off contract; noting the Plaintiffs’ contention to the Arbitrator in its defence and counterclaim that the contracts were not the standard or usual form of contract for building tennis courts made or adopted by the Industry Association or the Tennis Court and Sports Field Builder Association of Australasia.[221] The construction of only one clause in the “standard” conditions is in dispute, namely clause 4 with respect to interest and as this Court, and many other courts, has, or have, dealt with the construction of interest clauses, no further determination with respect to provisions of this nature will add substantially to the certainty of commercial law.
[221]See affidavit of Leonard Adrian Warren (14 August 2013), paragraph 16.

Finally, the point is made by KMS that, even were there to be a manifest error of law on the face of the Award, there remains a residual discretion under s 38(4)(b) to refuse leave to appeal.[222] I accept that having regard to the nature of the arbitration, the scope of the arbitration, the purpose of the Act which is to favour finality of awards, this is an instance where discretion to refuse leave to appeal under s 38 could reasonably be exercised. Nevertheless, for the reasons indicated, this position does not arise as no basis for leave to appeal has been established in any event.
[222]Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37, at [29] (French CJ, Gummow, Crennan and Bell JJ); Winter v Equuscorp [2010] VSC 419, at [11] (Croft J).

Orders

The parties are to bring in orders to give effect to these reasons. Otherwise, the question of costs with respect to this proceedings is reserved. I will hear counsel further on this question.

[2013] VSC 539

11 October 2013